Pensions Planning: The NUMBER
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the only problem is that this article assumes the person is not working though....
the question is: will a person aged 58, who continues to work and drawdown a pension pay nics on that pension?
thanks
My understanding is that if working and are also claiming pension you only pay NIC on the wage and not on the pension element.
HHx0 -
Hopelessly_Hopeful wrote: »My understanding is that if working and are also claiming pension you only pay NIC on the wage and not on the pension element.
HHx
absolutely correct; I drew a DB pension from 62 and worked until 65, no NI on the pension.The questions that get the best answers are the questions that give most detail....0 -
the only problem is that this article assumes the person is not working though....
the question is: will a person aged 58, who continues to work and drawdown a pension pay nics on that pension?
thanks
I've been in receipt of a DB pension since age 46 and I am still working 12 years later. I have paid no NI on my pension.0 -
I've been in receipt of a DB pension since age 46 and I am still working 12 years later. I have paid no NI on my pension.
Ditto, never paid a penny of NI on pension income myself despite working full time elsewhere.
Issue for me though is that the government (aka thieves), will start looking at non-NIC-able pensions as a plundering opportunity.
Luckily, the silver vote is a powerful one.0 -
This subject has been touched on but I know that some posters look to work out their outgoings using a top down calculation (i.e. mortgage + food + cars costs + etc).
Because these items are so "blocky", they can overshadow the other "fine drizzle" costs of day to day living. These costs never seem much on their own but slowly give you a good soaking.
For myself, I get a monthly statement from my current (main) bank account and record the net monthly withdrawals. These figures then feed into a simple spreadsheet that calculates total annual expenditure on a FY basis and, once set up, this method does not require much effort to manage.
However, to analyse the monthly statement consistently, I employ some "golden rules":- Include: salary, pension, expenses, bank/BS interest, minor PB wins and minor (sub £100) share dividends
- For funds moving out of my current account to, say, a higher bearing account but with the intention of transferring the money back at a later stage: ignore transfers in and out
- For funds moving out of my current account to another account but with the intention of eventually drawing the money as cash or cheques to third parties: include transfers out
- "Pass through" if, as in 2, a cheque has been made out to another account and a cheque from that account issued to a third party, for funds received from a fourth party as a contribution towards the third party: include transfers in
- Facilitation payment for a third party's purchase (to be refunded at a later date): ignore transfers in and out
- Ignore capital deposits
I know this list looks a bit long-winded but it is designed to iron out glitches caused by one-offs and churning between current accounts and higher interest accounts.0 -
Here's my strategy. I am 54 and hoping to take early retirement at 57 my wife is a year younger and is a housewife so no income. We are mortgage free and I am putting as much as I can afford into my company AVC while the 40% tax relief is still there. So basically we are not living up to the standard we could be if we spent our whole income.
I will take a hit on my DB scheme by going at 57 but my Wife will be able to get at her SIPP as she will be 56 so we will then be making the most of our tax allowances. Any investments outside of ISAS will go into my wife's name so that she maximises her personal allowance.
All this makes a massive difference and I reckon we will easily have as much disposable income between us as I have now on my salary after AVC contributions, tax, NI etc. We might have to dip into savings occasionally for big ticket items but I am cool with spending a bit more in the early years of retirement knowing that if we live long enough we will have two additional incomes at 67 from State Pensions plus at some time we may inherit some money (but not too soon I hope). So inheritances are not part of our financial planning.
If we were to be enjoying all of our money now I reckon the sudden drop in income would pretty much make early retirement a pipe dream. Plus of course our income in retirement would be less as well.
So really it's a bit of sacrifice now to hopefully see the benefit in the not too distant future.0 -
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Here's my strategy. I am 54 and hoping to take early retirement at 57 my wife is a year younger and is a housewife so no income. We are mortgage free and I am putting as much as I can afford into my company AVC while the 40% tax relief is still there. So basically we are not living up to the standard we could be if we spent our whole income.
I will take a hit on my DB scheme by going at 57 but my Wife will be able to get at her SIPP as she will be 56 so we will then be making the most of our tax allowances. Any investments outside of ISAS will go into my wife's name so that she maximises her personal allowance.
All this makes a massive difference and I reckon we will easily have as much disposable income between us as I have now on my salary after AVC contributions, tax, NI etc. We might have to dip into savings occasionally for big ticket items but I am cool with spending a bit more in the early years of retirement knowing that if we live long enough we will have two additional incomes at 67 from State Pensions plus at some time we may inherit some money (but not too soon I hope). So inheritances are not part of our financial planning.
If we were to be enjoying all of our money now I reckon the sudden drop in income would pretty much make early retirement a pipe dream. Plus of course our income in retirement would be less as well.
So really it's a bit of sacrifice now to hopefully see the benefit in the not too distant future.
Your plans look somewhat similar to mine, apart from my DB pensions are deferred so I'm already contributing into a DC scheme with work. Can you draw your AVC's independent of your DB pension? If not, you may be better contributing what you are putting in your AVCs into a personal pension.
In 3 years time then, instead of drawing your DB pension early, withdraw out of the personal pension whatever you need to last for a few (couple?) of years hopefully - bearing in mind rates of tax. Then you can draw out your DB pension at a later date with less actuarial reduction for the remainder of your life.0 -
Your plans look somewhat similar to mine, apart from my DB pensions are deferred so I'm already contributing into a DC scheme with work. Can you draw your AVC's independent of your DB pension? If not, you may be better contributing what you are putting in your AVCs into a personal pension.
In 3 years time then, instead of drawing your DB pension early, withdraw out of the personal pension whatever you need to last for a few (couple?) of years hopefully - bearing in mind rates of tax. Then you can draw out your DB pension at a later date with less actuarial reduction for the remainder of your life.
The AVC works really well as I can use it to significantly increase the pension commencement lump sum without reducing my pension. At the moment the PCLS is tax free and fingers crossed it stays that way. It is a smart AVC so I save on both tax and NI. I think my employer shares their NI saving with me because I get 12% NI reduction as well as 40% tax relief. So at the moment it is a great deal. I just have my fingers crossed that the next government don't screw it up too soon. Of course I can't get at it until I take my pension.
I also have a small FSAVC I could use and if I do decide to retire early I hope it will be with an voluntary redundancy package so I could defer my pension for two or three years and live off that. I also buy shares every month with 40% tax relief and they should akso be worth a few grand. I guess I will see what the numbers look like when the time comes.0 -
12% is the basic tax rate range of employee NI so it looks as though you're saving all of your own NI and your employer is saving all of their NI. If this is in the higher tax rate range maybe they just pay some of their NI to make it 12% regardless of income range.0
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